Problem:
The Refreshing Iced Tea Company manufactures premium flavored organic Iced Tea. Management is ready to close the books for the end of the third quarter in 2024 and your supervisor has presented you with the following information.
a. Total sales in gallons of flavored Iced Tea for July 2024 through September 2024 are asfollows: July 14,000 August 15,000 September 17,000 Each gallon of Iced Tea is packaged in eight 16-ounce bottles and sold in a case that sells for $15.00 per case. The company produced 47,500 units during the third quarter of 2024.
b. The company's Variable Costs include the following Direct Materials of $1.50 per gallon Direct Labor of $ per gallon (Each gallon of Iced Tea requires 15 minutes of direct labor time and the wage rate is $8.00 per hour) Variable MOH $ per gallon (The variable overhead rate is $2.00 per machine hour and processing one gallon of Iced Tea takes 45 minutes of machine time) Variable Selling and Administrative costs of $1.50 per gallon
c. The company's Fixed Costs for the quarter include the following: Manufacturing Overhead $47,500 Selling and Administrative $28,900 The company's fixed manufacturing overhead per gallon is $ . (The Fixed Manufacturing Overhead rate is based on Fixed Costs for the quarter and the units produced for the quarter.)
d. The company's manufacturing overhead is applied based on the number of gallons produced using the Variable Manufacturing Overhead Rate per gallon calculated in 'b' and the Fixed Manufacturing Overhead Rate per gallon calculated in 'c'.
e. Raw Materials Inventory consists entirely of direct materials and, at the beginning of the year, consists of 500 units of direct material at a cost of $1.50 per unit. The company purchased 48,000 units of direct material at a cost of $1.50 per unit. Each gallon of Iced Tea requires one unit of direct materials.
f. Beginning Work in process inventory consists of 700 gallons of partially processed Iced Tea. All raw materials are added at the beginning of the production process and these partially completed units are 60% complete for conversion costs. Ending work in process consists of 900 gallons of partially processed Iced Tea that are 50% complete for conversion costs. The company completed and transferred out 47,500 units this quarter. The beginning work in process and current period costs are as follows Beginning WIP Direct Materials $1,225 Conversion Costs $1,995 Current period Costs Direct Materials $71,250 Conversion Costs $213,750
g. There are 300 gallons of Iced Tea in the Finished Goods Inventory at the beginning of the year carried at a cost of $6.00. There are 1,800 gallons in ending Finished Goods Inventory carried at a cost of $6.00 per unit. Gross Margin and Contribution Margin Income Statements (HINT: For the Gross Margin Income Statement, Total Cost of Goods Sold should be equal to the Cost of Goods Sold calculated based on the FIFO method of assigning costs to goods transferred out and ending inventory). Following Cost Accounting principles